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Computing in the Cloud Is it Right for Your Organization

An Interview with Kevin DeCoster

NEWSLETTER
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February 23, 2011

Cloud computing has recently emerged as one of the most important trends in information technology. Though some observers insist the concept has been overhyped, most experts believe it represents a significant transformation in the way software is being delivered and used.

No one can deny the market for cloud-based solutions is growing rapidly. According to Gartner Group, the market for Software as a Service (SaaS), a primary application of cloud technology, will total $14 billion by 2013. McKinsey & Company estimates that SaaS is currently growing at a 17 percent annual rate.

In this interview Kevin DeCoster, a director in RSM’s technology practice, shares his insights on cloud computing and the pros and cons of using a cloud-based Customer Relationship Management system, or CRM.

Kevin, it seems likely that most businesspeople have at least heard of “cloud computing,” but it appears a fair number remain a bit unclear on the concept. Can you enlighten us?
In basic terms, cloud computing refers to a delivery model in which software applications and network infrastructure, like data storage or email servers, are provided over the Internet as a service. Traditionally, these technologies would reside within a company’s server room/data center or on an individual user’s hard drive. With cloud computing, a user located virtually anywhere in the world and operating virtually any device -- PC, iPad, smartphone, whatever – can gain access to information and services via an Internet connection.

Then I’m guessing a lot of people who are unfamiliar with the term “cloud computing” are nevertheless already using the technology, right? I mean, wouldn’t having an e-mail account through Yahoo or Google be considered “cloud computing”?
Strictly speaking, yes. Any time you store information on someone else’s computers and then access it via the Internet, you’re involved in cloud computing.

So then why is cloud computing generating so much buzz?
One reason is that many companies that have traditionally maintained their IT and data management systems in-house are migrating steadily toward cloud computing solutions. Growth in cloud-based applications is likely to outpace the growth of on-premise software fairly quickly, particularly among small and medium-sized businesses, or SMBs. Many organizations – not only businesses but universities, nonprofits and others – are recognizing the inherent advantages of cloud computing.

Such as?
Cloud computing offers a variety of benefits, particularly for organizations that haven’t already made huge investments in IT infrastructure and staff. The managers of a typical start up or SMB have to keep a close eye on cash, so they’d rather not devote scarce resources to computer hardware, software and IT personnel, if they can help it. Operating from the cloud tends to be the less expensive option, at least initially, since the buyer is charged a relatively small monthly fee instead of the one-time payment common with traditional software licenses. And in many cases you are charged on a usage basis, which means there is little waste; you’re not paying for the software when you’re not using it.

So cost savings are the primary benefit?
While many users initially are attracted to cloud computing because of cash flow considerations, that’s not the only reason businesses are migrating to the cloud. Small companies with relatively limited IT resources like it because it empowers them with sophisticated business processes that previously were only available to their larger competitors. But much larger organizations, including many with substantial IT capabilities, are also taking advantage of cloud computing.

What do big businesses find appealing about it?
We live in a world where change is constant; even the largest, most powerful corporations have to stay on their toes and be able to adapt quickly to fluctuating conditions. Cloud computing provides an impressive level of flexibility; companies not only can minimize fixed costs but can scale up and down almost immediately, making quick adjustments as workloads increase or decrease. It also can facilitate innovation and rapid decision making.

Are you seeing applications where the cloud option is particularly popular?
A wide range of cloud applications are being used by consumers and businesses -- everything from VoIP to online photo management. It’s become particularly popular in situations where collaboration is important and/or where people are geographically dispersed. For example, one application we’re seeing move to the cloud fairly rapidly is CRM.

That makes sense, since CRM is used by sales departments, which typically have people located all over the country, and all over the world, for that matter.
True, the use of CRM was pioneered by sales and marketing departments, and they continue to be among the most active users. But we’re seeing organizations use CRM in a variety of departments and disciplines. For example, we currently are working with municipalities to help them manage a variety of local government functions, such as managing the workflow associated with building permits. Another example is our work in the health care field. We’re helping clients employ CRM technology to track patient compliance with treatment plans, patient outcomes and overall cost of delivery. I suppose you could call that application “PRM,” for patient relationship management. Microsoft actually refers to its CRM product, Microsoft Dynamics CRM 2011, as an “XRM” solution to emphasize its applicability beyond just sales and marketing.

Aren’t companies hesitant to store the kind of information typically found in CRM systems on another company’s servers? We’re talking about detailed, proprietary information about current and prospective customers, among other things. Aren’t they worried about security breaches?
It wasn’t that long ago when a lot of business people agreed with you. Companies that had significant security concerns, or that had fiduciary reporting responsibility, sought hosting providers that carried an SAS 70 report or complied with SSAE 16 and ISAE 3402 standards. Today, most of the people with whom we consult recognize that the top-tier cloud providers offer levels of security that few organizations can match. That’s not to say there no longer are compliance-related considerations, particularly in areas of the federal government and among organizations with fiduciary reporting responsibilities. But such considerations exist regardless of whether their IT solutions are on-premise or cloud based. We often help clients analyze compliance requirements and then identify the cloud providers best able to meet their particular needs.

So should every company that’s evaluating a new or upgraded CRM system opt for the cloud computing option?
Helping companies select, install, configure, manage and maintain their CRM systems is a big part of our business, and we don’t push our clients toward one particular solution. Naturally, when a client is evaluating CRM options, one of their key considerations is whether to maintain the technology on premise – that is, license the software and install it on the client’s own systems – or have it hosted by a third party. For some companies, particularly those that already have made substantial investments in IT infrastructure and personnel, going the on-premise route makes sense. Others may have particular tax or regulatory compliance issues that can make the cloud option more challenging. And on-premise licensing can provide some cost savings over the long term – say, five years or more. But even that is changing as economies of scale are enabling cloud providers to lower their costs.
Frankly, today we are seeing relatively few companies elect to go the on-premise route. The vast majority are electing to have their CRM hosted by a firm like ours or by a cloud provider such as Microsoft.

So what are the key factors one should assess when determining whether or not cloud computing is the best option for your organization’s CRM system?
Many of the factors that make cloud computing attractive in general are of comparable importance when evaluating the pros and cons of your CRM options: relatively small upfront costs, the ability to deploy rapidly, the ability to scale up or down quickly, etc. When buying a CRM system, you want to make sure your vendor is stable and reliable; this is particularly important if that vendor will be maintaining your system offsite.
Another important area to consider is the ability to integrate your CRM with your existing enterprise applications. Most of the top cloud providers offer good integration capabilities, and it often is no more difficult to achieve this via the cloud than it is to do on-premise. However, there can be challenges when trying to integrate, say, data from on-premise ERP systems with data from a cloud-based CRM system. In such cases your best option is either to stick with an on-premise solution or partner with a firm that can host – and integrate – both applications in the cloud.

When assessing your CRM options, is user acceptance and adaptability an important consideration? Do most users find cloud-based systems more difficult to use than on-premise systems?
Overcoming user resistance is a crucial consideration when assessing CRM systems. One of Microsoft’s biggest selling features is the ease with which new users adapt to the Dynamics CRM 2011. The reason: it’s based on one of the most widely used programs in corporate America: Microsoft Outlook. However, while that may be an excellent reason to select the Microsoft product over a competing system, it’s of little use in helping you compare cloud-based and on-premise options. Most of the top cloud-based CRM solutions are as easy to use – and in many cases, easier to use – than their on-premise counterparts.

Well, there’s a lot to think about, but it sounds like cloud computing is a very attractive option for a lot of computer applications, including CRM. Any final caveats or suggestions you’d like to share?
Take a close look at your service-level agreements (SLA) to make sure there are no hidden costs that could come back to bite you. You need to be very clear what you are getting – and what you are not getting – in your SLA. While this is always a useful exercise, it can be particularly important when purchasing any cloud service. This is perhaps of less concern when dealing with Microsoft; most of its offerings are pretty standard. Salesforce.com, on the other hand, provides a larger array of options. That’s not a knock on Saleforce.com; having an array of choices can be beneficial. You just need to carefully evaluate them and know what you’re getting.

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